Election exposes Iran’s deep divisions

Almost 40 years ago a plot of land in the north of Tehran was confiscated from its wealthy owners in the wake of Iran’s Islamic revolution. It was one of many such land grabs by the country’s new leaders who promised to help the poor and win their support.

Today that same 4,000 sq m site is home to a newly-built tower block. But rather than housing the city’s poor, it is occupied by some of its wealthiest residents. The 10-storey building features tennis courts and a snooker hall on the ground floor; a garden and swimming pool on the roof; Porsche sports cars sit in the parking lot and Venetian chandeliers hang in the elegant high-ceiling lobby. Even the smallest of the 30-plus apartments would cost at least 120bn rials ($3.8m) to buy.

For many Iranians Tehran’s glittering new buildings have become a potent symbol of the opportunities they believe have been stolen from them. Few people have seen the benefits they were promised from the lifting of sanctions after the 2015 nuclear deal, and many now associate wealth with political patronage rather than individual endeavour.

The issues of inequality and corruption have dominated campaigning ahead of Friday’s presidential election, with candidates trading verbal blows in television debates on who is responsible. Some reformers argue that widespread corruption threatens the long-term survival of the Islamic Republic, which ousted the Pahlavi dynasty in 1979 on promises of equality and social justice for the poor. Yet by some calculations a third of the country remains in “absolute poverty”.

“These luxurious buildings are merely tips of an iceberg, which is the astronomical wealth of those who have no records of any innovative business or industrial and manufacturing work,” says a reform-minded official in the centrist government of Hassan Rouhani. “Wealth accumulated over a short period is usually [the result] of special advantages for those linked to power centres or their front people involved in the trade of oil, sugar and construction materials.”

Elected president in 2013, Mr Rouhani oversaw completion of the nuclear deal with western powers that led to the lifting of international sanctions. The 68-year-old has come under fire from rivals over his property holdings. But has hit back by urging Ebrahim Raisi — his hardline rival for the presidency — to explain why public money allocated for security is being spent on an initiative to bus voters to his election rallies.

The election, pitting Mr Rouhani against a hardline rival, is seen by many analysts as a referendum on how to best capitalise on the nuclear deal he reached with world leaders two years ago. While supporters of Mr Rouhani, who leads his rivals in unofficial opinion polls, demand political and social freedoms alongside a sound economy, hardliners are offering to treble monthly payments to the poor, provide cheap housing and give marriage loans.

Whichever camp wins the election, the nuclear accord will not be challenged. However there are concerns in Tehran that a hardline victory could provoke a reaction from the US and other western powers over Tehran’s role across the Middle East.

Reformers argue that a wholesale restructuring of the political system is needed to tackle the serious social divides and corruption if the country is to attract investment from both overseas and its own private sector, which accounts for just 20 per cent of the economy. While the Rouhani administration has had some success in damping inflation and stabilising the foreign currency market, youth unemployment officially stands at 26 per cent, but it is thought to be much higher.

“The youth know that Porsches and Maseratis are not the fruits of start-ups,” says another government official. “Iran’s economy has become an economy for the rich kids. There is an angry army of unemployed youth who threaten Iran like a nuclear bomb.”

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Corruption is not new in Iran. But the scale has skyrocketed over the past decade, say reform-minded economists and politicians. This was initially blamed on the jump in oil prices, but the international sanctions imposed over the nuclear programme also created more opportunities for shadowy figures to trade oil and basic commodities.

The 56-year-old cleric was a surprise candidate but is said to have the backing of the Revolutionary Guards and possibly, Ayatollah Ali Khamenei, the country’s supreme leader. He controls Iran’s wealthiest religious institution, Astan Quds Razavi, and has accused Mr Rouhani of widening the gap between rich and poor and of being lenient on wealthy non-tax payers.

“[In the past] a $1bn project could end up [costing] $1.1bn because of all the commissions and bribes,” says a government oil official. “But over the past decade it could cost [as much as] $3bn-$4bn. The people whose roots are in this political system have become incredibly greedy for big monies.”

Both hardline and pro-reform presidential candidates have blamed each other for not doing enough to fight corruption while in power.

Ebrahim Raisi, the hardline candidate, is the custodian of the shrine of Imam Reza in the northeastern city of Mashhad and runs the country’s wealthiest religious foundation, Astan Quds Razavi. He is thought to be backed by the elite Revolutionary Guards, the military force that controls a business empire estimated to be worth $100bn, and is portrayed by backers as a holy man who can root out corruption.

He has accused Mr Rouhani of widening the gap between rich and poor claiming that his government has been lenient on wealthy individuals who refuse to pay taxes or repay bank loans. The president mocked the comments as coming from a man who runs a religious institution that is exempt from tax.

Mr Raisi’s main rival for the hardline vote, Mohammad Baqer Qalibaf, quit the race on Monday in an effort, he said, to unify hardline support. Mr Qalibaf, the Tehran mayor, had been drawn into the property controversy because he oversaw a doubling in the construction of high-rise buildings in the capital over the past decade exposing him to criticism from the Rouhani administration.

Mr Qalibaf had campaigned on a promise to defend the “96 per cent” rather than the 4 per cent of “dealers [who suck people’s blood] like leeches”.

In a heated TV exchange he told Mr Rouhani: “They are your friends.” And in a second clash held up a property document that he alleged showed that the president had received 800 sq m of land in western Tehran at a large discount.

Mr Rouhani denied he had exploited his political office. He previously asked the mayor: “Didn’t you give a person who looted people’s wealth a licence to build a 33-storey tower?”

The Rouhani jibe was an attempt to link the mayor to Babak Zanjani, a little-known businessman transformed by a high-profile criminal trial into the country’s most notorious billionaire. Suspected of acting as a front for powerful military and political figures, Zanjani was convicted last year of selling crude oil worth $2.8bn when Iran was under international sanction and siphoning off petrodollars owed to the treasury.

The Rouhani government claims the nuclear deal with the US and other major powers has allowed it to clean up corrupt practises that, it alleges, flourished under earlier administrations. The first vice-president Es’haq Jahangiri, who is also standing for president but is expected to drop out before polling day, alleged during the campaign that as much as $700bn in oil revenues generated during the period of Mahmoud Ahmadi-Nejad’s presidency, 2005 to 2013, has not been accounted for. Mr Jahangiri gave no evidence to support his claim, which was rubbished by Mr Ahmadi-Nejad.

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“Those who institutionalised corruption in the country have to be ashamed,” Mr Jahangiri said. “Those who created Babak Zanjani have to be ashamed.”

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Analysts warn that Iran’s battered economy, which suffered three years of recession after 2011, cannot sustain high levels of corruption or pay for the populist policies associated with the Ahmadi-Nejad era.

Businesses complain that the economy is stagnant despite economic growth last year of 6.6 per cent, according to an International Monetary Fund forecast. That improvement has come largely as a result of a doubling in oil exports thanks to the lifting of sanctions. Yet companies argue that they are having to work much harder just to stand still and some blame the sluggishness on the military’s entrenched role in the economy.

“In 2002, imports worth $2.5bn could increase economic growth by 1 per cent, now we need $12bn worth of imports to reach that growth because the economic system is so inefficient,” says Saeed Laylaz, an analyst. “About 40 per cent of the economy is not accountable to the government and does not pay taxes. The economy has been militarised.”

The involvement of the Revolutionary Guards in the economy dates back to the end of the Iran-Iraq war in 1988. The conflict gave it new prominence and the leaders of the Islamic Republic saw benefits in having military insiders — those in power with an interest in the system’s survival — in charge of key economic sectors. It has gone on to build an empire that now controls everything from the telecoms sector to the construction of roads and which wields enormous political influence.

The Rouhani government has curbed the Guard’s economic activities by blocking it from some large-scale projects to open the door to the private sector and foreign investors. “Those groups which enjoy political and security support [a clear reference to the Revolutionary Guards] do not let free competition . . . and growth of the private sector,” Mr Rouhani said on Friday.

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Tensions with the Revolutionary Guard are not Mr Rouhani’s only problem. The death in January of Akbar Hashemi Rafsanjani has further complicated the election. The former president, one of the country’s most powerful figures in the past four decades, allied himself with the reformist camp in recent years.

Although tainted by corruption allegations, he was seen by many as a pragmatist rather than one of the ideologically motivated founders of the system, and one of the few people capable of bridging divides within the country. Hundreds of thousands took to the streets to mark his passing amid hardliners’ concerns that it could turn into another opposition rally.

“The high turnout at the Rafsanjani funeral was a message from the people to political leaders that they are not passive but very sensitive about developments which affect their future,” says an independent political analyst.

Before his death, according to aides, Rafsanjani had urged Ayatollah Ali Khamenei, the supreme leader, to consider a restructuring of the political system to address society’s ills. Among the ideas was an overhaul of velayat-e faqih, which gives ultimate authority to the supreme leader. Mr Khamenei did not respond to the proposals say the aides.

“If the political system becomes more efficient [introduces reforms], there will be no legitimacy crisis,” says Soroush Mahallati, a senior reform-minded cleric who was close to Rafsanjani. “But what we see today is a lack of correlation between the rulers’ ideas and public demands [for a more modern political structure] . . . which has resulted in people’s mistrust and disillusionment.”

The presidential race comes at a sensitive time for the Islamic Republic. Political factions are positioning themselves for when Mr Khamenei, 77, the ultimate decision maker, dies. Whoever is president at the time could influence the decision over who replaces him.

“Should the leader die in the next four years, either Rouhani or Raisi, depending on which is president, could have a chance of becoming the next leader,” says a regime insider close to both figures. “The sensitivity of this presidential election is that it may determine Iran’s direction in the coming decades.”

The Islamic Republic also faces rapid social change that is exacerbating the divide between the lower class in urban and rural areas and an educated middle class, while fraying some of the traditional values that previously underpinned the state and the family.

Although the people and their leaders appear to be pulling in different directions there have been no major clashes. However, concerns remain that unless inequality is addressed, there could be.

“Iranian society has a new definition of its rights by which it wants to be part of the bigger world, enjoy life and distance itself from tradition,” says Taghi Azad Armaki, a sociologist. “The social system is not in crisis. It is the political system which does not know how to adapt itself to fast [moving] social developments.”